The modest improvement in housing affordability across most Australian markets in the September quarter may be short-lived.

The Housing Industry Association’s (HIA) Affordability Report says that despite falling dwelling prices, affordability is significantly worse than a year ago.

HIA Senior Economist, Tom Devitt, says a household still requires 1.8 average incomes - in both the capitals and the regions - to comfortably service a mortgage on a median-priced dwelling.

“An ‘affordable’ home would be serviceable with a single such income,’ he says.

According to the HIA, underlying conditions driving housing demand and supply mean that affordability pressures could return.

“This interlude of improving affordability is likely to be short-lived. The underlying fundamentals of the market bode worse for affordability than they did last year,’ he says.

Devitt says there are 11 million households chasing 10 million homes in Australia and population growth will increase demand even further.

He says once confidence returns to the market, dwelling prices will begin to increase again and affordability will deteriorate further.

The report says affordability improved across most markets during the September quarter, led by Brisbane, which recorded a 5.6% improvement, followed by Perth (5.2%) and Sydney (4.9%).

Affordability deteriorated in four markets: regional Northern Territory (-3%), regional South Australia (-1.5%), Darwin (-0.7%) and regional Tasmania (-0.4%).